Rent Concessions Rise Amid Elevated Supply
Concessions have increased from 2023 levels in 40 of the 45 largest metros.
As rent growth slows in many parts of the nation, more property owners are offering concessions like free weeks of rent or free parking to lure tenants to their buildings.
Rent concessions have increased from 2023 levels in 40 of the 45 largest metro areas, according to Zillow. One in three rentals listed on the real estate marketplace offered at least one concession in July this year – up from one in four last year. In 25 metros, the share of rentals with a concession rose from June to July, but in 24 it fell.
The report noted that the Zillow Observed Renter Demand Index, a measure of rental market tightness, plummeted 23.3% since July 2023. But it said this was due less to a slump in demand than to the large number of new apartments coming online. The non-seasonally adjusted rental vacancy rate remained at 6.6% in the second quarter, unchanged since its level in winter 2021.
Despite the concessions offered, many renters still struggle with affordability. “This slowdown in rent growth is helping the typical renter stay just on the right side of affordability. A household earning the median renter income would spend 30% of that income on rent,” the report said.
“That is an improvement from 2022, but right on the edge of what is considered affordable,” the report noted. “The income needed to comfortably afford the typical U.S. rent — meaning spending no more than 30% of income — is $82,795.”
The report found that the typical asking rent in July was $2,070, up 0.4% from June and 3.4% from 2023. Furthermore, rents rose from year-ago levels in 48 of the 50 largest metro areas. Single-family rents rose even more over the year, by 4.7% to $2,294. They have shot up 40.1% since the beginning of the pandemic. Multifamily rents climbed 2.6% in the same period to $1,916, and have spiked 27.3% since the beginning of the pandemic.
“The question as we look ahead is whether the current status quo of slow rent growth and elevated concessions will continue, or whether rents will actually come down,” the report commented.